Technically Speaking
Nov Beans and The Analyst Who Cried "Bull"
I'm sure most of you are familiar with Aesop's Fable "The Boy Who Cried Wolf". In a nutshell, a young shepherd boy is constantly fooling villagers by yelling that a wolf is attacking his flock. When a wolf actually does appear, and again he cries out, the villagers don't believe him. The sheep, and the boy, are then eaten by the wolf.
I love a story with a happy ending.
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Most of you are probably thinking the same thing is going on with this blog. Ten days ago a post was titled "Reversals of Fortune", talking about grains, including November soybeans, and bullish reversal patterns. Before that it was the week of March 30 (blog on April 4). Time and time again these bullish reversals have seemingly failed, with November soybeans falling from $9.74 1/4 (weekly close on April 3, 2015) to $9.04 1/4 (weekly close Friday, June 12).
Nevertheless, as I look at its weekly chart at mid-week, the Nov bean contract is in position (again) to establish a bullish reversal. Monday saw it post a new contract low of $8.95 3/4, but instead of triggering sell orders by the basketful from Watson (my term for computerized, algorithm-based, investment trade), the contract abruptly turned and rallied. By early Wednesday morning it had reached a high of $9.38 3/4, easily taking out last week's high of $9.31 3/4. In fact, depending on how the end of the week plays out, November soybeans could move above its 4-week high of $9.44 (dotted red line).
So yes, new-crop Nov beans are in position to establish another bullish reversal (Some would call it a key bullish reversal given the establishment of a new contract low. I tend to save that term for the monthly chart. (e.g. October 2014)), needing only a higher close this week. Last Friday's $9.04 1/4 settle was just off the weekly low of $9.00 1/2. That means from Wednesday through this Friday's close the contract has almost 30 cents of wiggle room.
There are a few other tools to keep an eye on as the week progresses: 1) Weekly stochastics (second study) continue to grow more bullish, building on the crossover below the oversold level of 20% the week of June 1. 2) Commercial buying has reemerged, as indicated by the weakening carry in the November to March futures spread (third study, green line). 3) Total trade volume (bottom study, purple histogram) needs to increase over last week's 1,272,023 contracts, something that looks doubtful given this week's 528,271 contracts (so far).
For now I'll say this again: November soybeans look to be growing more bullish as it establishes another reversal patter. And yes, the market is clinging to its major (long-term) bullish signals from last October as the Nov contract holds above $9.04.
You've heard this before I know, and yes, ultimately, this analyst could wind up being eaten by a bear.
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